Question

Keck industries is planning to issue $7 million in bonds with a six-year maturity date and an annual rate of 5.4 percent. how much will they pay in interest over the life of the bonds?

Answer 1

Keck Industries will pay approximately $1,761,799.49 in interest over the life of the bonds.

Step-by-step explanation:

To calculate how much Keck Industries will pay in interest over the life of the bonds, we can use the formula for calculating compound interest. The formula is: Interest = Principal x (1 + rate)^time - Principal

In this case, the Principal is $7 million, the rate is 5.4% (or 0.054), and the time is 6 years. Plugging these values into the formula, we get: Interest = $7,000,000 x (1 + 0.054)^6 - $7,000,000

Calculating this expression, we find that Keck Industries will pay approximately $1,761,799.49 in interest over the life of the bonds.

Answer 2

The equation to be used is


`F=P (1+i)^(n)`

where P is the present worth equal to $7 million, i is the annual interest rate of 5.4% and n is the number of years which is equal to 6 years. Then,


`F = 17 \ million(1+0.054)^(6)=2,330,733.33`

Therefore, the Keck Industries will pay $2,330,733 over the life of the bonds.